The European alternative finance industry — which includes marketplace lending, crowdfunding, balance sheet lending, and invoice trading, among other models — is far smaller by volume than in the US and UK, according to a report from the University of Cambridge and KPMG.

The European alt finance industry’s market volume was €1 billion ($1.1 billion) in 2015, up 72% from €594 million ($668 million) the year before. In comparison, the UK industry’s market volume was €4 billion ($4.5 billion) in 2015, up 84% YoY, while the market volume in the US was €34 billion ($38 billion), up 213% from 2014.

Here are some other insights on the European alt finance industry from the report:

France has the largest alt finance industry. It has 49 platforms and the highest market volume at €319 million ($356 million). Germany is the second-largest market, with 35 platforms and a market volume of €249 million ($278 million).

Marketplace consumer lending is the largest sector. It garners 36% in market share and a volume of €366 million ($408 million). Marketplace business lending is the second-largest sector, with a 21% share of the market and volume of €212 million ($237 million). Marketplace consumer lending is also the largest sector in the US, while marketplace business lending recently took the top spot in the UK.

Invoice trading is the fastest growing sector. It grew 1057% from €7 million ($7.8 million) in 2014 to €81 million ($90 million) in 2015. In comparison, invoice trading had a volume of €388 million ($433 million) in the UK 2015. In the US, invoice trading is relatively nascent, with only $32 million in volume in 2015.

Lower levels of institutional participation. Only 44% of European platforms reported any level of institutional funding for their products. The figure is almost identical (45%) in the UK. In contrast, institutional investors dominate funding in the US — particularly for balance sheet lending, where they fund over 90% of loans.

The growth of the European alt finance industry has been hindered by a lack of clarity over regulation. While many countries have bespoke regimes, they are often complex and have different rules for different models — in France consumer lenders must have a banking license, while business lenders are exempt, for example.

We think it unlikely that we will see significant growth in the industry until national regulators streamline their regimes. And this probably won't happen in the near future, as many only introduced their regimes in the last 12 months, and changes to financial regulation are notoriously slow to enact.

This is an intriguing situation, as fintech regulations in the U.S. have been extremely restrictive thus far, but those in Europe have proven successful and allowed the region to become a hub of financial technology innovation. The U.S. would be wise to examine the policies in place across the pond and consider how to implement similar ones within its own borders.

The fintech industry is booming, with VC-backed fintech investment growing 106% to reach £10 billion ($13.8 billion) in 2015. But the new business models fintechs are bringing to market also need to be regulated, and the old models aren't sufficient. The approach regulators take will have a significant impact on how big fintech gets and how fast it gets there.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it's becoming a model for regulators around the world.

Here are some of the key takeaways from the report:

The financial technology sector is booming, and Europe is a leading region for growth. VC-backed fintech companies in Europe raised £1 billion ($1.5 billion) in funding across 125 deals in 2015.

With this boom in funding comes a need to regulate the nascent industry. There are a variety of approaches — active, passive, and restrictive — that regulators can take. The EU and the UK, in particular, have taken an active approach, in order to encourage growth.

The regulation that will have the most impact on the European fintech market is the Second Directive on Payments Services, known as PSD2. It will force banks to open up their systems to fintechs. This will allow fintechs to act as intermediaries between banks and their customers.

The UK regulator is actively promoting its approach to regulation as a model for other countries to follow. Some of its innovations are already being copied by other regulators around the world.

In full, the report:

Examines the different approaches to fintech that regulators can take

Explains the key EU laws that will affect the European financial services industry in the next two years and beyond

Explores the potential impact of new regulations

Details the workings of the initiative central to the UK regulator's approach to fintech

Highlights what can be achieved when regulators, governments, and fintech companies work together

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